Incentive Money for Bloom Energy and Other Fuel Cell Makers May End

For nearly a decade fuel cell makers have benefited from subsidies doled out by a state-run program designed to support green technology. As the NBC Bay Area Investigative Unit first revealed, no company has benefited more than Sunnyvale-based fuel cell maker Bloom Energy. But could the company’s days in the program be numbered? A new state review of the program found natural gas-powered electric fuel cells pollute too much and cost more than they’re worth. Senior Investigative reporter Vicky Nguyen reports in a story that aired on March 31, 2016. (Published Thursday, March 31, 2016)

The California Public Utilities Commission is considering a proposal to stop providing ratepayer funds to fuel cell makers under a clean energy program.

As part of a review of the Self Generation Incentive Program (SGIP) ordered by state lawmakers, the commission’s energy division staff found last fall that natural gas-powered electric fuel cells pollute too much and don’t provide future cost benefits to society.

The program, which is funded by PG&E customers, has doled out more than $1.3 billion in state incentives to eligible technologies since 2001. No company has benefited more than Sunnyvale electric fuel cell maker Bloom Energy, which has received more than $400 million in state subsidies since 2007. However, the commission staff’s findings could signal an end to program participation for Bloom.

Staff considered a cost effectiveness study that recommended evaluating how technologies will deliver societal benefits. In the November proposal, staff noted that by 2020 “total societal costs” of fuel cells will have greatly exceeded their benefits.

The commission staff also reviewed past performance data of electric fuel cells and found the technology fails to meet updated greenhouse gas requirements the commission approved last fall. In its report, commission staff concluded that natural gas consuming electric fuel cells “fail, by a small margin to be cleaner than the grid.”

Based on the observations, the staff recommended that funding no longer be provided for natural gas-powered electric fuel cells. Bloom Energy takes issue with the report, saying it contains several inaccuracies.

When SGIP began in the early 2000s, the purpose was to spur innovation and create technologies to make California’s power more reliable. As the program evolved, it added additional environmental requirements including the reduction of greenhouse gases.

Critics have long questioned the environmental benefits of Bloom’s fuel cells, especially those that run on natural gas, which is a dirty, polluting fossil fuel, they say.

“It makes no sense that we are subsidizing fuel cells and technologies that use natural gas,” said Marcel Hawiger, energy attorney for the Utility Reform Network. “The point of this program was we were supposed to develop clean generation that customers can use.”

In addition to natural gas electric fuel cells, the commission staff also recommends removing natural gas powered micro-turbines from the list of technologies that receive program funds.

The NBC Bay Area Investigative Unit revealed last year that lawmakers questioned the program’s “increasingly absurd practice” of subsiding technologies that run on natural gas. Critics have pointed out that funding fossil fuel technology is out of step with California’s clean energy goals, noting the state already draws much of its power from renewable energy sources like wind and water.

The Investigative Unit first exposed in 2014 that Bloom’s technology was not much cleaner than California’s grid. A review of performance data obtained from public agencies that use Bloom’s fuel cells showed that the technology was producing more carbon emissions than advertised. The company revised its emissions estimates shortly after the NBC Bay Area report aired.

Bloom Energy declined an interview request to discuss the current CPUC staff proposal. In communications with the commission and NBC Bay Area, the company maintains that it meets all program goals, which include reducing pollutants, creating safe and commercially available technology, shifting peak energy demands, demonstrating potential to bring the technology to market and cutting greenhouse gas emissions.

Bloom’s emissions are “clearly lower than grid emissions in California,” the company wrote in a letter to commission president Michael Picker. The company also criticized commission staff for errors in the report.

“The Staff Proposal comparing Bloom’s prior products to future emissions goals is speculative and fundamentally flawed by failing to factor the performance of our latest technology, which has significantly improved from the past generations upon which the Proposal’s recommendation is based,” the company wrote.

In an email to NBC Bay Area, the company wrote that if the commission factors in the “correct performance facts, we fully expect that Bloom will continue to be an eligible and beneficial technology within the SGIP program.”

“These types of incentive programs are the foundation for the future,” Lin said. “We live here and we have kids that will grow up here. We want California to be as clean and affordable and livable as possible.”

The commission has not said when it will issue a decision on new program rules.

In the meantime, half of this year’s SGIP funds have already been given to companies that qualified under existing program rules. Many organizations have questioned the commission’s decision to release more than $40 million to technologies before it solidified new program rules. The commission said it considered a potential “market disruption” that could have occurred if it decided not to release any of the funds while it mulled the staff’s proposal.